(c) The Executive shall at all times be subject to, comply with, observe andcarry out (i) the Company’s rules, regulations, policies and codes ofethics and/or conduct applicable to its employees generally and in effect fromtime to time and (ii) such rules, regulations, policies, codes of ethics and/orconduct, directions and restrictions as the Board may from time to time reasonablyestablish or approve generally for senior executive officers of the Company.**2.****Term of Employment**. The Executive’s employment with the Company will commence onJanuary 3, 2011 (the date of such commencement, the “Effective Date”). This Agreementshall govern the terms and conditions of the Executive’s employment by the Company, and thetermination thereof, during the period that commences on the Effective Date and ends on February 2,2013 (the “Term”), which date coincides with the last day of the Company’s 2012 fiscalyear; provided that the Term shall automatically be extended for successive one year periods unlesseither party provides written notice (a “Notice of Non-Renewal”) at least ninety (90) daysprior to the expiration of the Term that the Term shall not be further extended. The portion ofthe Term during which the Executive is actually employed by the Company under this Agreement isreferred to as the “Employment Period”.**3.****Compensation and General Benefits**.     **3.1****Base Salary**.     (a) During the Employment Period, the Company agrees to pay to the Executive abase salary at a rate equal to $600,000 per annum (such base salary, as may beadjusted from time to time pursuant to **Section 3.1(b)**, is referred to herein as the“Base Salary”). The Executive’s Base Salary, less amounts required to bewithheld under applicable law, shall be payable in equal installments in accordancewith the Company’s normal payroll practices and procedures in effect from time totime for the payment of salaries to officers of the Company, but in no event lessfrequently than monthly.     (b) The Company shall review the Executive’s performance on an annual basisand, based on such review, may change the Base Salary, as it, acting in its solediscretion, shall determine to be reasonable and appropriate.     **3.2****Bonus**.     (a) Upon commencement of employment, the Executive shall receive a one-timebonus of $150,000. Subject to **Section 3.****6(a)** below, this bonus will be paid withthe first regular payroll date following the Effective Date. If the Executive’semployment terminates under **Section 4.4**prior to the first anniversary of theEffective Date, the Executive shall be required to repay 100% ($150,000) of thisbonus, and if such termination occurs on or after the first anniversary of theEffective Date but prior to the second anniversary of the Effective Date, theExecutive shall be required to repay to the Company 50% ($75,000) of this bonus.
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     (b) Pursuant to the Company’s Annual Incentive Plan (the “AIP”), withrespect to each fiscal year of the Company that begins after January 29,2011 and that ends during the Employment Period, the Executive shall beeligible to receive from the Company an annual performance bonus (the “AnnualBonus”), based upon the attainment of annual goals established by the Board orthe Compensation Committee of the Board, which may include comparable store sales,earnings before interest, taxes, depreciation and amortization (“EBITDA”)and/or cash generation goals. The Executive’s target Annual Bonus shall beone-hundred percent (100%) of the Executive’s Base Salary paid during theapplicable fiscal year if the targeted levels of performance to be determined bythe Company or the Company Parent for the applicable year are met, with fiftypercent (50%) of the Executive’s Base Salary paid during the applicable fiscal yearpayable if threshold levels of performance are met, and one-hundred fifty percent(150%) of the Executive’s Base Salary paid during the applicable fiscal yearpayable if maximum levels of performance are achieved. Any Annual Bonus earnedshall be payable in full as soon as reasonably practicable following thedetermination thereof, but in no event later than April 15 of the following year(unless administratively impracticable to do so because the Company’s results forthe applicable year had not yet been finalized) and in accordance with theCompany’s normal payroll practices and procedures. Notwithstanding the foregoinglanguage, but subject to the last sentence of this **Section 3.****2(b)****,**with respect tothe fiscal year ending January 28, 2012, the Executive will receive a minimumAnnual Bonus of $300,000 (the “Guaranteed Bonus”). Except as otherwise expresslyprovided in the AIP and **Section 4**hereof, any Annual Bonus (or portion thereof)payable under this **Section 3.****2(b)** shall not be earned and payable unless theExecutive is employed by the Company on the last day of the period to which suchAnnual Bonus relates, provided that no Annual Bonus for any preceding period shallbe payable if the Executive’s employment is terminated for Cause; and furtherprovided that, with respect to the Guaranteed Bonus, the Executive must be employedby the Company on the day Annual Bonuses are paid by the Company to other similarlysituated employees in accordance with the Company’s normal payroll practices andprocedures.     **3.3****Expenses/Relocation**.     (a) In addition to any amounts to which the Executive may be entitled pursuantto the other provisions of this **Section 3**or elsewhere herein, the Executive shallbe entitled to receive reimbursement from the Company for all reasonable andnecessary expenses incurred by the Executive during the Term in performing theExecutive’s duties hereunder on behalf of the Company or the Company Parent,subject to, and consistent with, the Company’s policies for expense payment andreimbursement, in effect from time to time.     (b) The Executive will be entitled to reimbursement for customary relocationexpenses under the Company’s relocation policy. The Executive shall also beentitled to a one-time relocation allowance of $100,000 payable upon the relocationof his and his spouse’s principal residence to the greater Chicago metropolitanarea. If the Executive’s employment terminates under **Section 4.4**prior to thefirst anniversary of the Effective Date, the Executive
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shall be required to repay to the Company 100% of all relocation benefits(including such relocation allowance and any other customary benefits and anyadditional benefits mutually agreed upon), and if such termination occurs on orafter the first anniversary of the Effective Date but prior to the secondanniversary of the Effective Date, the Executive shall be required to repay to theCompany 50% of such relocation benefits.     (c) Within 30 days after the Effective Date, the Company shall, uponpresentation of a reasonably detailed invoice, pay the reasonable professional feesincurred by the Executive in connection with the negotiation and documentation ofthis Agreement, up to a maximum of $ 15,000.     **3.4****Benefits**.     (a) During the Employment Period, in addition to any amounts to which theExecutive may be entitled pursuant to the other provisions of this **Section 3**orelsewhere herein, the Executive shall be entitled to participate in, and to receivebenefits under, any benefit plans, arrangements or policies made available by theCompany to its senior executive officers generally, subject to and on a basisconsistent with the terms, conditions and overall administration of each such plan,arrangement or policy; provided that the Executive shall be entitled to no lessthan four weeks of vacation and paid time off to be taken in accordance withCompany policy.     (b) During the Employment Period, the Company shall provide the Executive witha monthly automobile allowance of $850.     **3.5****Employee Stock Options**.     (a) Claire’s, Inc. has adopted a stock option plan, in the form attachedhereto as **Exhibit A**and incorporated herein by reference (the “Plan”), forthe grant of stock options to employees or directors of the Company or of anysubsidiary of the Company to purchase shares of Common Stock of Claire’s, Inc. (the“Common Stock”).     (b) On or shortly after the Effective Date, pursuant to the Plan, theExecutive shall be granted nonqualified options to purchase 320,000 shares ofCommon Stock at a price per share equal to $10 for its shares on the terms setforth in the Option Grant Letter attached hereto as **Exhibit B**and incorporatedherein by reference (the “Option Letter”).     **3.6****Stock Investment**.     (a) On or shortly after the Effective Date, the Executive shall have theopportunity to purchase up to 30,000 shares of Common Stock for $10 per share. Thepurchase of these shares (the “Stock Purchase”) shall otherwise be on theterms set forth in the Stock Letter attached hereto as **Exhibit C**.
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     (b) Upon completion of the Stock Purchase, the Executive shall be granted anadditional nonqualified stock option to purchase a number of shares equal to thenumber of shares purchased pursuant to **Section 3.****6(a)** at a price per share equal to$10.00 on the terms set forth in the Stock Letter.**4.****Termination**.     **4.1****General**. The employment of the Executive hereunder (and the Employment Period)shall terminate as provided in Section 2 hereof, unless earlier terminated in accordance with theprovisions of this **Section 4**.     **4.2****Death or Disability of the Executive**.     (a) The employment of the Executive hereunder (and the Employment Period)shall terminate upon (i) the death of the Executive and (ii) at the option of theCompany, upon not less than fifteen (15) days’ prior written notice to theExecutive or the Executive’s personal representative or guardian, if the Executivesuffers a “Total Disability” (as defined in **Section 4.****2(b)** hereof). Upontermination for death or Total Disability, the Company shall pay to the Executive,guardian or personal representative, as the case may be, a prorated share of theAnnual Bonus pursuant to **Section 3.****2(b)** hereof (based on the period of actualemployment) that the Executive would have been entitled to had the Executive workedthe full year during which the termination occurred, which bonus shall be based onactual performance of the Company for the year of such termination. Any bonusshall be payable as soon as reasonably practicable following the determinationthereof, but in no event later than April 15 of the following year (unlessadministratively impracticable to do so because the Company’s results for theapplicable year had not yet been finalized), and in accordance with the Company’snormal payroll practices and procedures.     (b) For purposes of this Agreement, “Total Disability” shall mean (i)if the Executive is subject to a legal decree of incompetency (the date of suchdecree being deemed the date on which such disability occurred), (ii) the writtendetermination by a physician selected by the Company and acceptable to Executive(which acceptance shall not be unreasonably withheld), (which expense shall bepaid by the Company) that, because of a medically determinable disease, injury orother physical or mental disability, the Executive is unable substantially toperform, with or without reasonable accommodation, the material duties of theExecutive required hereby, and that such disability has lasted for ninety (90)consecutive days or any one hundred twenty (120) days during the immediatelypreceding twelve (12)-month period or is, as of the date of determination,reasonably expected to last six (6) months or longer after the date ofdetermination, in each case based upon medically available reliable information or(iii) Executive’s qualifying for benefits under the Company’s long-term disabilitycoverage, if any, applicable to its senior executives generally, in conjunctionwith determining mental and/or physical disability for purposes of this Agreement,the Executive hereby consents to (x) any
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examinations that the Company reasonably determines are relevant to adetermination of whether the Executive is mentally and/or physically disabled orare required by the Company physician, (y) furnish such medical information as maybe reasonably requested and (z) waive any applicable physician patient privilegethat may arise because of such examination. All expenses incurred by the Executiveunder this subsection shall be paid by the Company. **4.3** **Termination by the Company Without Cause, Non-Renewal of the Agreement****by theCompany, Resignation by the Executive For Good Reason or in the****event of a Change ofControl**.     (a) The Company may terminate the Executive’s employment without “Cause” (asdefined in **Section 4.3(f)**), and thereby terminate the Executive’s employment (andthe Employment Period) under this Agreement at any time with no requirement fornotice to the Executive. In addition, the Company may terminate the Executive uponexpiration of the Term by providing a Notice of Non-Renewal pursuant to Section 2hereof.     (b) The Executive may resign, and thereby terminate the Executive’s employment(and the Employment Period), at any time for “Good Reason” (as defined in **Section4.****3(e)** hereof), upon not less than thirty (30) days’ prior written notice to theCompany specifying in reasonable detail the reason therefore; provided,however, that the Company shall have a reasonable opportunity to cure anysuch Good Reason (to the extent possible) within such thirty (30) day notice periodafter the Company’s receipt of such notice; and providedfurtherthat, if the Company is not seeking to cure, the Company shall not be obligated toallow the Executive to continue working during such period and may, in its solediscretion, accelerate such termination of employment (and the Employment Period)to any date during such period. Executive may not terminate employment under thisAgreement for Good Reason regarding any of the Company’s acts or omissions of whichExecutive had actual notice for sixty (60) days or more, or such other periodmutually agreed to in writing by the Company and the Executive, prior to givingnotice of termination for Good Reason.     (c) In the event the Executive’s employment is terminated pursuant to this**Section 4.3**, then, subject to **Section 4.****3(d)** hereof, the following provisions shallapply:     (i) The Company shall continue to pay the Executive the Base Salary to whichthe Executive would have been entitled pursuant to **Section 3.1**hereof (at the BaseSalary rate during the year of termination) for a twelve (12)-month period followingsuch date of termination, with all such amounts payable in accordance with theCompany’s normal payroll practices and procedures in the same manner and at the sametime as though the Executive remained employed by the Company.
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     (ii) If such termination occurs upon or within eighteen (18) months following aChange of Control (as defined in **Exhibit B**attached hereto), the Company shallcontinue to pay the Executive the Base Salary to which the Executive would have beenentitled pursuant to **Section 3.1**hereof (at the Base Salary rate during the year oftermination) for the greater of (A) twelve (12)-month period following such date oftermination, or (B) the period until the end of the then remaining Term, with allsuch amounts payable in accordance with the Company’s normal payroll practices andprocedures in the same manner and at the same time as though the Executive remainedemployed by the Company.     (iii) In the event the Executive’s employment is terminated pursuant to this**Section 4.3**without Cause**,**and if the Company has previously effected reductions inthe Executive’s Base Salary and the base salary of all senior executives of theCompany, which reductions were substantially similar, then the Base Salary rate forpurposes of **Section 4.****3(c)(i)** or **(ii)**hereof shall be the Base Salary rate in effectimmediately prior to such reductions.     (iv) The Company shall continue to provide the Executive with group healthinsurance coverage as provided herein, as such coverage may be amended from time totime. If the Executive elects continuation coverage (with respect to theExecutive’s coverage and/or any eligible dependent coverage) under the ConsolidatedOmnibus Budget Reconciliation Act of 1986 (“COBRA Continuation Coverage”)with respect to the Company’s group health insurance plan, the Executive shall beresponsible for payment of the monthly cost of COBRA Continuation Coverage. Unlessprohibited by law, the Company shall reimburse the Executive for any portion of themonthly cost of COBRA Continuation Coverage that exceeds the amount of the monthlyhealth insurance premium (with respect to the Executive’s coverage and/or anyeligible dependent coverage) payable by the Executive immediately prior to the dateof Executive’s termination, such reimbursements to continue (A) for a period oftwelve (12) months or (B) in the event that the Executive’s Base Salary is beingpaid pursuant to **Section 4.****3(c)(ii)**, for the period set forth therein. The Companyshall pay the reimbursements on a monthly basis in accordance with the Company’snormal payroll practices and procedures.     (d) As a condition precedent to the Executive’s right to receive the benefitsset forth in **Section 4.****3(c)** hereof, the Executive agrees to execute a release ofthe Company and its respective Affiliates, officers, directors, stockholders,employees, agents, insurers, representatives and successors from and against anyand all claims that the Executive may have against any such Person (as defined in**Section 5.****4(f)** hereof) relating to the Executive’s employment by the Company andthe termination thereof, in the form attached hereto as **Exhibit D**, as such form maybe amended from time to time to comply with changes in law. In addition, theExecutive agrees that his right to receive and retain the benefits set forth in**Section 4.****3(c)** hereof shall be conditional upon his continuing compliance with therestrictive covenants contained in **Section 5**.
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     (e) For purposes of this Agreement, the Executive would be entitled toterminate the Executive’s employment for “Good Reason” if without theExecutive’s prior written consent:     (i) the Company fails to comply with any material obligation imposed by thisAgreement, including a material diminution of the Executive’s duties as President ofthe North America division;     (ii) the Company effects a reduction in the Executive’s Base Salary, unless allsenior executives of the Company receive a substantially similar reduction in basesalary; or     (iii) the Company requires the Executive to be based (excluding regular travelresponsibilities) at any office or location more than 75 miles outside of HoffmanEstates, Illinois, provided that the Executive had previously relocated hisprincipal residence to the greater Chicago metropolitan area.     (f) For purposes of this Agreement, “Cause” means the occurrence of any one ormore of the following events:     (i) an act of fraud, embezzlement, theft or any other material violation of lawthat occurs during or in the course of Executive’s employment with the Company;     (ii) intentional damage to the Company’s assets;     (iii) intentional disclosure of the Company’s confidential information contraryto the Company’s policies;     (iv) material breach of Executive’s obligations under this Agreement;     (v) intentional engagement in any activity which would constitute a breach ofExecutive’s duty of loyalty or of the Executive’s obligations under this Agreement;     (vi) material breach of any of material the Company’s policy that has beencommunicated to the Executive in writing;     (vii) the willful and continued failure to substantially perform Executive’sduties for the Company (other than as a result of incapacity due to physical ormental illness); or     (viii) willful conduct by Executive that is demonstrably and materiallyinjurious to the Company, monetarily or otherwise.     For purposes of this **Section 4.3(f)**, an act, or a failure to act, shall not be deemed“willful” or “intentional” unless it is done, or omitted to be done, by Executive in badfaith or without a reasonable belief that Executive’s action or omission was in the bestinterest of the Company. Failure to meet performance standards or objectives, byitself, does not constitute “Cause”.
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     **4.4****Termination For Cause, Voluntary Resignation Other Than For Good Reason or ElectionNot to Extend the Term by the Executive**.     (a) (i) the Company may, upon action of the Board, terminate the employment ofthe Executive (and the Employment Period) at any time for “Cause,” (ii) theExecutive may voluntarily resign other than for Good Reason and thereby terminatethe Executive’s employment (and the Employment Period) under this Agreement at anytime upon not less than thirty (30) days’ prior written notice or (iii) theExecutive may provide a Notice of Non-Renewal pursuant to **Section 2**hereof, inwhich case the Executive’s employment will terminate upon expiration of the Term.     (b) Upon termination by the Company for Cause, by the Executive as the resultof resignation for other than for Good Reason, or by the Executive at the end ofthe Term following a Notice of Non-Renewal provided by the Executive, the Executiveshall be entitled to receive all amounts of earned but unpaid Base Salary andbenefits accrued and vested through the date of such termination.     (c) Before the Company may terminate the Executive for Cause pursuant to**Section 4.****4(a)(i)**, the Board shall deliver to the Executive a written notice of theCompany’s intent to terminate the Executive for Cause, and the Executive shall havebeen given a reasonable opportunity to cure any such acts or omissions (which aresusceptible of cure as reasonably determined by the Board by majority vote thereof)within thirty (30) days after the Executive’s receipt of such notice.     **4.5****Resignation from Officer Positions**. Upon the termination of the Executive’semployment for any reason (unless otherwise agreed in writing by the Company and the Executive),the Executive will be deemed to have resigned, without any further action by the Executive, fromany and all officer, director and/or director positions that the Executive, immediately prior tosuch termination, (a) held with the Company or any of its Affiliates and (b) held with any otherentities at the direction of, or as a result of the Executive’s affiliation with, the Company orany of its Affiliates. If for any reason this **Section 4.5**is deemed to be insufficient toeffectuate such resignations, then Executive will, upon the Company’s request, execute anydocuments or instruments that the Company may deem necessary or desirable to effectuate suchresignations.     **4.6****Section 409A of the Code**. Notwithstanding anything to the contrary in thisAgreement, the parties mutually desire to avoid adverse tax consequences associated with theapplication of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) to thisAgreement and agree to cooperate fully and take appropriate reasonable actions that preserve to theExecutive, to the maximum extent practical, the full economic benefit of this Agreement whileavoiding any such consequences under Section 409A of the Code, including delaying payments and
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reforming the form of the Agreement if such action would reduce or eliminate taxes and/orinterest payable as a result of Section 409A of the Code. In this regard, notwithstanding anythingto the contrary in this Section 4, to the extent necessary to comply with Section 409A of the Code,any payment required under this Section 4 shall be deferred for a period of six (6) months, but notlonger than six (6) months, regardless of the circumstances giving rise to or the basis for suchpayment.     **5. ****Confidentiality, Work Product and Non-Competition and Non-Solicitation**. **5.1** **Confidentiality**.     (a) In connection with the Executive’s employment with the Company, theCompany promises to provide the Executive with access to “Confidential Information”(as defined in **Section 5.****4(d)** hereof) in support of the Executive’s employmentduties. The Executive recognizes that the Company’s business interests require aconfidential relationship between the Company and the Executive and the fullestpractical protection and confidential treatment of all Confidential Information.At all times, both during and after the Employment Period, the Executive shall notdirectly or indirectly: (i) appropriate, download, print, copy, remove, use,disclose, divulge, communicate or otherwise “Misappropriate” (as defined in **Section5.****4(e)** hereof), any Confidential Information, including, without limitation,originals or copies of any Confidential Information, in any media or format, exceptfor the Company’s benefit within the course and scope of the Executive’s employmentor with the prior written consent of a majority of the Board; or (ii) take orencourage any action that would circumvent, interfere with or otherwise diminishthe value or benefit of the Confidential Information to any of the Company Parties(as defined in **Section 5.****4(b)** hereof).     (b) All Confidential Information, and all other information and propertyaffecting or relating to the business of the Company Parties within the Executive’spossession, custody or control, regardless of form or format, shall remain, at alltimes, the property of the respective Company Parties, the appropriation, useand/or disclosure of which is governed and restricted by this Agreement.     (c) The Executive acknowledges and agrees that:     (i) the Executive occupies a unique position within the Company, and theExecutive is and will be intimately involved in the development and/orimplementation of Confidential Information;     (ii) in the event the Executive breaches this **Section 5.1**with respect to anyConfidential Information, such breach shall be deemed to be a Misappropriation ofsuch Confidential Information; and     (iii) any Misappropriation of Confidential Information will result in immediateand irreparable harm to the Company.
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     (d) Upon receipt of any formal or informal request, by legal process orotherwise, seeking the Executive’s direct or indirect disclosure or production ofany Confidential Information to any Person, the Executive shall promptly and timelynotify the Company and provide a description and, if applicable, hand deliver acopy of such request to the Company. The Executive irrevocably nominates andappoints the Company as the Executive’s true and lawful attorney-in-fact to act inthe Executive’s name, place and stead to perform any act that the Executive mightperform to defend and protect against any disclosure of Confidential Information.     (e) At any time the Company may request, during or after the EmploymentPeriod, the Executive shall deliver to the Company all originals and copies ofConfidential Information and all other information and property affecting orrelating to the business of the Company Parties within the Executive’s possession,custody or control, regardless of form or format, including, without limitation anyConfidential Information produced by the Executive. Both during and after theEmployment Period, the Company shall have the right of reasonable access to review,inspect, copy and/or confiscate any Confidential Information within the Executive’spossession, custody or control.     (f) Upon termination or expiration of this Agreement, the Executive shallimmediately return to the Company all Confidential Information, and all otherinformation and property affecting or relating to the business of the CompanyParties, within the Executive’s possession, custody or control, regardless of formor format, without the necessity of a prior Company request.     (g) During the Employment Period, the Executive represents and agrees that theExecutive will not use or disclose any confidential or proprietary information ortrade secrets of others, including but not limited to former employers, and thatthe Executive will not bring onto the premises of the Company or access suchconfidential or proprietary information or trade secrets of such others, unlessconsented to in writing by said others, and then only with the prior writtenauthorization of the Company.     **5.2****Work Product/Intellectual Property**.     (a) Assignment. The Executive hereby assigns to the Company allright, title and interest to all “Work Product” (as defined in **Section 5.4(h)**hereof) that (i) relates to any of the Company Parties’ actual or anticipatedbusiness, research and development or existing or future products or services, or(ii) is conceived, reduced to practice, developed or made using any equipment,supplies, facilities, assets, information or resources of any of the CompanyParties (including, without limitation, any intellectual property rights).     (b) Disclosure. The Executive shall promptly disclose Work Product tothe Board and perform all actions reasonably requested by the Company (whetherduring or after the Employment Period) to establish and confirm the
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ownership and proprietary interest of any of the Company Parties in any WorkProduct (including, without limitation, the execution of assignments, consents,powers of attorney, applications and other instruments). The Executive shall notfile any patent or copyright applications related to any Work Product except withthe written consent of a majority of the Board.     **5.3****Non-Competition and Non-Solicitation**.     (a) In consideration of the Confidential Information being provided to theExecutive as stated in **Section 5.1**hereof, and other good and valuable newconsideration as stated in this Agreement, including, without limitation,employment and/or continued employment with the Company, and the businessrelationships, Company goodwill, work experience, client, customer and/or vendorrelationships and other fruits of employment that the Executive will have theopportunity to obtain, use and develop under this Agreement, the Executive agreesto the restrictive covenants stated in this **Section 5.3**.     (b) From the Effective Date until the end of the Restricted Period (as definedin **Section 5.****4(g)** hereof), the Executive agrees that the Executive will not,directly or indirectly, on the Executive’s own behalf or on the behalf of any otherPerson, within the United States of America or in any other country or territory inwhich the businesses of the Company are conducted:     (i) engage in a Competing Business (as defined in **Section 5.****4(c)** hereof),including, without limitation, by owning, managing, operating, controlling, beingemployed by, providing services as a consultant or independent contractor to orparticipating in the ownership, management, operation or control of any CompetingBusiness;     (ii) induce or attempt to induce any customer, vendor, supplier, licensor orother Person in a business relationship with any Company Party, for or with whichthe Executive or employees working under the Executive’s supervision had any director indirect responsibility or contact during the Employment Period, (A) to dobusiness with a Competing Business or (B) to cease, restrict, terminate or otherwisereduce business with the Company for the benefit of a Competing Business, regardlessof whether the Executive initiates contact; or     (iii) (A) solicit, recruit, persuade, influence or induce, or attempt tosolicit, recruit, persuade, influence or induce anyone employed or otherwiseretained by any of the Company Parties (including any independent contractor orconsultant), to cease or leave their employment or contractual or consultingrelationship with any Company Party, regardless of whether the Executive initiatescontact for such purposes or (B) hire, employ or otherwise attempt to establish, forany Person, any employment, agency, consulting, independent contractor or otherbusiness relationship with any Person who is or was employed
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or otherwise retained by any of the Company Parties (including any independentcontractor or consultant).     (c) The parties hereto acknowledge and agree that, notwithstanding anything in**Section 5.****3(b)(i)** hereof, (i) the Executive may own or hold, solely as passiveinvestments, securities of Persons engaged in any business that would otherwise beincluded in **Section 5.****3(b)(i)**, as long as with respect to each such investment thesecurities held by the Executive do not exceed five percent (5%) of the outstandingsecurities of such Person and such securities are publicly traded under Section 12or Section 15 of the Securities Exchange Act of 1934, as amended (the “ExchangeAct”), and (ii) the Executive may serve on the board of directors (or othercomparable position) or as an officer of any entity at the request of the Board;provided, however, that in the case of investments otherwisepermitted under clause (i) above, the Executive shall not be permitted to, directlyor indirectly, participate in, or attempt to influence, the management, directionor policies of (other than through the exercise of any voting rights held by theExecutive in connection with such securities), or lend the Executive’s name to, anysuch Person.     (d) The Executive acknowledges that (i) the restrictive covenants contained inthis **Section 5.3**hereof are ancillary to and part of an otherwise enforceableagreement, such being the agreements concerning Confidential Information and otherconsideration as stated in this Agreement, (ii) at the time that these restrictivecovenants are made, the limitations as to time, geographic scope and activity to berestrained, as described herein, are reasonable and do not impose a greaterrestraint than necessary to protect the good will and other legitimate businessinterests of the Company, including without limitation, Confidential Information(including trade secrets), client, customer and/or vendor relationships, clientand/or customer goodwill and business productivity, (iii) in the event oftermination of the Executive’s employment, the Executive’s experiences andcapabilities are such that the Executive can obtain gainful employment withoutviolating this Agreement and without the Executive incurring undue hardship, (iv)based on the relevant benefits and other new consideration provided for in thisAgreement, including, without limitation, the disclosure and use of ConfidentialInformation, the restrictive covenants of this **Section 5.3**, as applicable accordingto their terms, shall remain in full force and effect even in the event of theExecutive’s involuntary termination from employment, with or without Cause and (v)the Executive has carefully read this Agreement and has given careful considerationto the restraints imposed upon the Executive by this Agreement and consents to theterms of the restrictive covenants in this **Section 5.3**, with the knowledge thatthis Agreement may be terminated at any time in accordance with the provisionshereof.
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     **5.4****Definitions**. For purposes of this Agreement, the following terms shall have thefollowing meanings:     (a) An “Affiliate” of any specified Person means any other Person,whether now or hereafter existing, directly or indirectly controlling or controlledby, or under direct or indirect common control with, such specified Person. Forpurposes hereof, “control” or any other form thereof, when used with respect to anyPerson, means the power to direct the management and policies of such Person,directly or indirectly, whether through the ownership of voting securities, bycontract or otherwise; and the terms “controlling” and “controlled” shall havemeanings correlative to the foregoing.     (b) “Company Parties” means the Company, and its direct and indirectparents, subsidiaries and Affiliates, and their successors in interest.     (c) “Competing Business” means any business that owns or operates aspecialty retail chain, which chain derives 15% or more of its revenue for thetrailing 12 months from the sale of costume jewelry or accessories targeted togirls or women. For purposes of this definition only, accessories shall not bedeemed to include footwear; provided, that, if such specialty retail chain is notprimarily in the business of selling footwear, then footwear shall be included indetermining the 15% amount.     (d) Confidential Information.     (i) Definition. “Confidential Information” means any and allmaterial, information, ideas, inventions, formulae, patterns, compilations,programs, devices, methods, techniques, processes, know how, plans (marketing,business, strategic, technical or otherwise), arrangements, pricing and other dataof or relating to any of the Company Parties (as well as their customers and/orvendors) that is confidential, proprietary or trade secret (A) by its nature, (B)based on how it is treated or designated by a Company Party, (C) because thedisclosure of which would have a material adverse effect on the business or plannedbusiness of any of the Company Parties and/or (D) as a matter of law.     (ii) Exclusions. Confidential Information does not include material,data, and/or information (A) that any Company Party has voluntarily placed in thepublic domain, (B) that has been lawfully and independently developed and publiclydisclosed by third parties, (C) that constitutes the general non-specializedknowledge and skills gained by the Executive during the Employment Period or (D)that is otherwise in the public domain through lawful means; provided,however, that the unauthorized appropriation, use or disclosure ofConfidential Information by the Executive, directly or indirectly, shall not affectthe protection and relief afforded by this Agreement regarding such information.     (iii) Inclusions. Confidential Information includes, withoutlimitation, the following information (including without limitation, compilations orcollections of information) relating or belonging to any Company Party (as well astheir clients, customers and/or vendors) and created, prepared, accessed, used orreviewed by the Executive during or after the Employment Period: (1) product
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and manufacturing information, such as ingredients, combinations of ingredientsand manufacturing processes; (2) scientific and technical information, such asresearch and development, tests and test results, formulae and formulations, studiesand analysis; (3) financial and cost information, such as operating and productioncosts, costs of goods sold, costs of supplies and manufacturing materials,non-public financial statements and reports, profit and loss information, margininformation and financial performance information; (4) customer related information,such as customer related contracts, engagement and scope of work letters, proposalsand presentations, customer-related contacts, lists, identities and prospects,practices, plans, histories, requirements and needs, price information and formulaeand information concerning client or customer products, services, businesses orequipment specifications; (5) vendor and supplier related information, such as theidentities, practices, history or services of any vendors or suppliers and vendor orsupplier contacts; (6) sales, marketing and price information, such as marketing andsales programs and related data, sales and marketing strategies and plans, sales andmarketing procedures and processes, pricing methods, practices and techniques andpricing schedules and lists; (7) database, software and other computer relatedinformation, such as computer programs, data, compilations of information andrecords, software and computer files, presentation software and computer-stored orbacked-up information including, but not limited to, e-mails, databases, wordprocessed documents, spreadsheets, notes, schedules, task lists, images and video;(8) employee-related information, such as lists or directories identifyingemployees, representatives and contractors, and information regarding thecompetencies (knowledge, skill, experience), compensation and needs of employees,representatives and contractors and training methods; and (9) business- andoperation-related information, such as operating methods, procedures, techniques,practices and processes, information about acquisitions, corporate or businessopportunities, information about partners and potential investors, strategies,projections and related documents, contracts and licenses and business records,files, equipment, notebooks, documents, memoranda, reports, notes, sample books,correspondence, lists and other written and graphic business records.     (e) “Misappropriate”, or any form thereof, means:     (i) the acquisition of any Confidential Information by a Person who knows orhas reason to know that the Confidential Information was acquired by theft, bribery,misrepresentation, breach or inducement of a breach of a duty to maintain secrecy orespionage through electronic or other means (each, an “Improper Means”); or     (ii) the disclosure or use of any Confidential Information without the expressconsent of the Company by a Person who (A) used Improper Means to acquire knowledgeof the Confidential Information (B) at the time of disclosure or use, knew or hadreason to know that his or her knowledge of the Confidential Information was (x)derived from or through a Person who had utilized Improper Means to acquire it, (y)acquired under circumstances giving rise to a duty to
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maintain its secrecy or limit its use or (z) derived from or through a Personwho owed a duty to the Company to maintain its secrecy or limit its use or (C)before a material change of his or her position, knew or had reason to know that itwas Confidential Information and that knowledge of it had been acquired by accidentor mistake.     (f) “Person” means any individual, corporation, partnership, limitedliability company, joint venture, association, business trust, joint-stock company,estate, trust, unincorporated organization, government or other agency or politicalsubdivision thereof or any other legal or commercial entity.     (g) “Restricted Period” means the longer of (i) twelve (12) monthsafter the date of termination of employment (the Executive’s last day of work forthe Company) or (ii) the period during which the Executive is receiving paymentsfrom the Company pursuant to **Section 4**hereof.     (h) “Work Product” means all patents and patent applications, allinventions, innovations, improvements, developments, methods, designs, analyses,drawings, reports, creative works, discoveries, software, computer programs,modifications, enhancements, know-how, formulations, concepts and ideas, and allsimilar or related information (in each case whether or not patentable), allcopyrights and copyrightable works, all trade secrets, confidential information,and all other intellectual property and intellectual property rights that areconceived, reduced to practice, developed or made by the Executive either alone orwith others in the course of employment with the Company (including employmentprior to the date of this Agreement).     **5.5****Remedies**. Because the Executive’s services are unique and because the Executivehas access to Confidential Information, the Executive acknowledges and agrees that if the Executivebreaches any of the provisions of **Section 5**hereof, the Company may suffer immediate andirreparable harm for which monetary damages alone will not be a sufficient remedy. The restrictivecovenants stated in **Section 5**hereof are without prejudice to the Company’s rights and causes ofaction at law.     **5.6****Interpretation; Severability**.     (a) The Executive has carefully considered the possible effects on theExecutive of the covenants not to compete, the confidentiality provisions and theother obligations contained in this Agreement, and the Company has made everyeffort to limit the restrictions placed upon the Executive to those that arereasonable and necessary to protect the Company’s legitimate business interests.     (b) The Executive acknowledges and agrees that the restrictive covenants setforth in this Agreement are reasonable and necessary in order to protect theCompany’s valid business interests. It is the intention of the parties hereto thatthe covenants, provisions and agreements contained herein shall be enforceable tothe fullest extent allowed by law. If any covenant, provision or
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agreement contained herein is found by a court having jurisdiction to beunreasonable in duration, scope or character of restrictions, or otherwise to beunenforceable, such covenant, provision or agreement shall not be renderedunenforceable thereby, but rather the duration, scope or character of restrictionsof such covenant, provision or agreement shall be deemed reduced or modified withretroactive effect to render such covenant, provision or agreement reasonable orotherwise enforceable (as the case may be), and such covenant, provision oragreement shall be enforced as modified. If the court having jurisdiction will notreview the covenant, provision or agreement, the parties hereto shall mutuallyagree to a revision having an effect as close as permitted by applicable law to theprovision declared unenforceable. The parties hereto agree that if a court havingjurisdiction determines, despite the express intent of the parties hereto, that anyportion of the covenants, provisions or agreements contained herein are notenforceable, the remaining covenants, provisions and agreements herein shall bevalid and enforceable. Moreover, to the extent that any provision is declaredunenforceable, the Company shall have any and all rights under applicable statutesor common law to enforce its rights with respect to any and all ConfidentialInformation or unfair competition by the Executive.**6.****Miscellaneous**.     **6.1****Public Statements**.     (a) Media Nondisclosure. The Executive agrees that during theEmployment Period or at any time thereafter, except as may be authorized in writingby the Company, the Executive will not directly or indirectly disclose or releaseto the Media any information concerning or relating to any aspect of theExecutive’s employment or termination from employment with the Company and/or anyaspect of any dispute that is the subject of this Agreement. For the purposes ofthis Agreement, the term “Media” includes, without limitation, any newsorganization, station, publication, show, website, web log (blog), bulletin board,chat room and/or program (past, present and/or future), whether published throughthe means of print, radio, television and/or the Internet or otherwise, and anymember, representative, agent and/or employee of the same.     (b) Non-Disparagement. The Executive agrees that during theEmployment Period or at any time thereafter, the Executive will not make anystatements, comments or communications in any form, oral, written or electronic toany Media or any customer, client or supplier of the Company or any of itsAffiliates, which would constitute libel, slander or disparagement of the Companyor any of its Affiliates, including, without limitation, any such statements,comments or communications that criticize, ridicule or are derogatory to theCompany or any of its Affiliates; provided, however, that the termsof this **Section 6.****1(b)** shall not apply to communications between the Executive and,as applicable, the Executive’s attorneys or other persons with whom communicationswould be subject to a claim of privilege existing under common law, statute or ruleof procedure. The Executive further agrees that theExecutive will not in any way solicit any such statements, comments orcommunications from others.
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     **6.2****ARBITRATION**. SUBJECT TO THE RIGHTS UNDER SECTION 6.3 HEREOF TO SEEK INJUNCTIVE OROTHER EQUITABLE RELIEF, BINDING ARBITRATION SHALL BE THE EXCLUSIVE REMEDY FOR ANY AND ALL DISPUTES,CLAIMS OR CONTROVERSIES, WHETHER STATUTORY, CONTRACTUAL OR OTHERWISE, BETWEEN THE PARTIES HERETOARISING UNDER OR RELATING TO THIS AGREEMENT OR THE EXECUTIVE’S EMPLOYMENT BY OR TERMINATION FROMTHE COMPANY (INCLUDING, BUT NOT LIMITED TO, THE AMOUNT OF DAMAGES, OR THE CALCULATION OF ANY BONUSOR OTHER AMOUNT OR BENEFIT DUE) (COLLECTIVELY, “DISPUTES”). THE PARTIES EACH WAIVE THERIGHT TO A JURY TRIAL AND WAIVE THE RIGHT TO ADJUDICATE THEIR DISPUTES UNDER THIS AGREEMENT OUTSIDETHE ARBITRATION FORUM PROVIDED FOR IN THIS AGREEMENT, EXCEPT AS OTHERWISE PROVIDED IN THISAGREEMENT.     (a) Procedure Generally. The parties agree to submit the Dispute to asingle arbitrator selected from a panel of JAMS arbitrators. The arbitration willbe governed by the JAMS Comprehensive Arbitration Rules and Procedures in effect atthe time the arbitration is commenced, subject to the terms and modifications ofthis Agreement. If for any reason JAMS cannot serve as the arbitrationadministrator or cannot fulfill the panel requirements of the ArbitrationProvision, the Company may select an alternative arbitration administrator, such asAAA, to serve under the terms of this Agreement.     (b) Arbitrator Selection. To select the arbitrator, the parties shallmake their respective strikes from a panel of former federal court judges andmagistrates, to the extent available from JAMS (the “First Panel”). If theparties cannot agree upon an arbitrator from the First Panel or if such a panel isnot available from JAMS, then the parties will next make their respective strikesfrom a panel of former Illinois state court trial and appellate judges, to theextent available from JAMS (the “Second Panel”). Any arbitrators proposedfor the First and Second Panels provided for in this **Section 6.****2(b)** must beavailable to serve in the Agreed Venue. If the parties cannot agree upon anarbitrator from the Second Panel or if such a panel is not available from JAMS,then the parties will next make their respective strikes from the panel of allother JAMS arbitrators available to serve in the Agreed Venue.     (c) **VENUE****. THE PARTIES STIPULATE AND AGREE THAT THE EXCLUSIVE VENUEOF ANY SUCH ARBITRATION PROCEEDING (AND OF ANY OTHER PROCEEDING, INCLUDING ANYCOURT PROCEEDING, UNDER THIS AGREEMENT) SHALL BE CHICAGO, ILLINOIS (THE “****AGREEDVENUE****”).**
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     (d) Authority and Decision. The arbitrator shall have the authorityto award the same damages and other relief that a court could award. Thearbitrator shall issue a reasoned award explaining the decision and any damagesawarded. The arbitrator’s decision will be final and binding upon the partiesand enforceable by a court of competent jurisdiction. The parties will abide byand perform any award rendered by the arbitrator. In rendering the award, thearbitrator shall state the reasons therefor, including (without limitation) anycomputations of actual damages or offsets, if applicable.     (e) Fees and Costs. In the event of arbitration under the terms ofthis Agreement, the fees charged by JAMS or other arbitration administrator and thearbitrator shall be borne by the parties equally. In addition, the parties shalleach bear their own costs, expenses and attorneys’ fees incurred in arbitration.     (f) Limited Scope. The following are excluded from bindingarbitration under this Agreement: claims for workers’ compensation benefits orunemployment benefits; replevin; and claims for which a binding arbitrationagreement is invalid as a matter of law.     **6.3****Injunctive Relief**. The parties hereto may seek injunctive relief in arbitration;provided, however, that as an exception to the arbitration agreement set forth in**Section 6.2**hereof, the parties, in addition to all other available remedies, shall each have theright to initiate an action in any court of competent jurisdiction in order to request injunctiveor other equitable relief regarding the terms of **Sections 5**or **6.2**hereof. The exclusive venue ofany such proceeding shall be in the Agreed Venue. The parties agree (a) to submit to thejurisdiction of any competent court in the Agreed Venue, (b) to waive any and all defenses eitherparty may have on the grounds of lack of jurisdiction of such court and (c) that neither partyshall be required to post any bond, undertaking or other financial deposit or guarantee in seekingor obtaining such equitable relief. Evidence adduced in any such proceeding for an injunction maybe used in arbitration as well. The existence of this right shall not preclude or otherwise limitthe applicability or exercise of any other rights and remedies that a party hereto may have at lawor in equity.     **6.4****Settlement of Existing Rights**. In exchange for the other terms of this Agreement,the Executive acknowledges and agrees that: (a) the Executive’s entry into this Agreement is acondition of employment and/or continued employment with the Company, as applicable; (b) except asotherwise provided herein, this Agreement will replace any existing employment agreement betweenthe parties and thereby act as a novation, if applicable; (c) the Executive is being provided withaccess to Confidential Information, including, without limitation, proprietary trade secrets of oneor more Company Parties, to which the Executive has not previously had access; (d) all Companyinventions and intellectual property developed by the Executive during any past employment with theCompany and all goodwill developed with the Company’s clients, customers and other businesscontacts by the Executive during any past employment with Company, as applicable, is the exclusiveproperty of the Company; and (e) all Confidential Information and/or specialized training accessed,created, received or utilized by the Executive during any past employment with Company, asapplicable, will be subject to the restrictions on Confidential Information described in thisAgreement, whether previously so agreed or not.
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     **6.5****Indemnification**. The Executive shall be entitled from the Effective Date untilthe end of the Employment Period in the capacity as an officer or director of the Company or any ofits subsidiaries to the benefit of the indemnification provisions contained in the By-Laws of theCompany or as a matter of law, whichever is greater. In addition, during the term of theExecutive’s employment and, where applicable under the terms of the relevant liability policythereafter, the Executive shall be covered under any directors’ and officers’ insurance policymaintained by the Company.     **6.6****Post-Termination Assistance**. During the Restricted Period, the Executive shallcooperate, at the reasonable request of the Company (i) in the transition of any matter for whichthe Executive had authority or responsibility during the Employment Period, or (ii) with respect toany other matter involving the Company for which the Executive may be of assistance. The Executiveshall be entitled to reimbursement of any out-of-pocket expenses he incurs in providing suchassistance upon submission of documentation supporting such expenses.     **6.7****Entire Agreement; Waiver**. This Agreement contains the entire agreement betweenthe Executive and the Company with respect to the subject matter hereof, and supersedes any and allprior understandings or agreements, whether written or oral. No modification or addition hereto orwaiver or cancellation of any provision hereof shall be valid except by a writing signed by theparty to be charged therewith. No delay on the part of any party to this Agreement in exercisingany right or privilege provided hereunder or by law shall impair, prejudice or constitute a waiverof such right or privilege.     **6.8****Governing Law**. This Agreement shall be governed by and construed in accordancewith the laws of the State of Illinois without regard to principles of conflict of laws.     **6.9****Successors and Assigns; Binding Agreement**. The rights and obligations of theparties under this Agreement shall be binding upon and inure to the benefit of the parties heretoand their heirs, personal representatives, successors and permitted assigns. This Agreement is apersonal contract, and, except as specifically set forth herein, the rights and interests of theExecutive herein may not be sold, transferred, assigned, pledged or hypothecated by any partywithout the prior written consent of the others. As used herein, the term “successor” as itrelates to the Company, shall include, but not be limited to, any successor by way of merger,consolidation or sale of all or substantially all of such Person’s assets or equity interests.     **6.10****Representation by Counsel; Independent Judgment**. Each of the parties heretoacknowledges that (a) it or the Executive has read this Agreement in its entirety and understandsall of its terms and conditions, (b) it or the Executive has had the opportunity to consult withany individuals of its or the Executive’s choice regarding its or the Executive’s agreement to theprovisions contained herein, including legal counsel of its or the Executive’s choice, and anydecision not to was the Executive’s or its alone and (c) it or the Executive is entering into thisAgreement of its or the Executive’s own free will, without coercion from any source, based upon itsor the Executive’s own independent judgment.     **6.11****Interpretation**. The parties and their respective legal counsel activelyparticipated in the negotiation and drafting of this Agreement, and in the event of any ambiguityor mistake herein, or any dispute among the parties with respect to the provisions hereto, noprovision of this Agreement shall be construed unfavorably against any of the parties on the groundthat the Executive, it, or the Executive’s or its counsel was the drafter thereof.
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     **6.12****Survival**. The applicable provisions of **Sections 4, 5**and **6**hereof shall survivethe termination of this Agreement.     **6.13****Notices**. All notices and communications hereunder shall be in writing and shallbe deemed properly given and effective when received, if sent by facsimile or telecopy, or bypostage prepaid by registered or certified mail, return receipt requested, or by other deliveryservice which provides evidence of delivery, as follows:If to the Company, to:Claire’s Stores, Inc.